EUR/JPY holds losses below 183.00 amid growing intervention speculation
- EUR/JPY weakens as the Japanese Yen strengthens amid rising speculation of market intervention.
- Japan’s PM Takaichi said the government would act against speculative and abnormal market moves, without naming the market.
- Germany’s IFO Business Sentiment Index will be eyed later in the day.
EUR/JPY extends its losses for the second successive session, trading around 182.90 during the Asian hours on Monday. The currency cross depreciates as the Japanese Yen (JPY) gains ground amid growing speculation of intervention.
Bloomberg reported on Sunday that Japan’s Prime Minister (PM), Sanae Takaichi, said the government would take necessary action against speculative and abnormal market movements, without specifying which market she was referring to.
Prime Minister Takaichi’s remarks came after a sharp reversal in the yen late on Friday, when traders said the Federal Reserve Bank of New York had conducted a so-called rate check with major banks, seeking indicative JPY exchange rates. Such a move is widely seen as a signal that authorities may be preparing for another intervention. Earlier that day, however, Japan’s top currency official declined to comment on whether a rate check had been conducted by Japanese authorities.
The Japanese Yen was also supported by broad-based US dollar weakness, as heightened geopolitical and trade risks weighed on the greenback, alongside expectations that President Donald Trump could soon replace Fed Chair Jerome Powell with a more dovish successor.
Eurozone flash PMI data pointed to a soft services sector in January, with the index slipping to 51.9, below both December’s reading and market expectations. Earlier releases from Germany were more encouraging, as the Services PMI beat forecasts and remained in expansionary territory, while the Manufacturing PMI improved but stayed below the expansion–contraction threshold. Traders will likely observe Germany’s IFO - Business Sentiment Index later in the day.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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